To alleviate some suffering by homeowners, the Obama Administration introduced the “Making Homes Affordable” plan last March. Unfortunately, the plan has not yet had the intended effect.
Article by the Grand Law Firm
Economists debate whether or not the country is actually currently in a recession. Some say that there are positive signs that we have reached the bottom and the economy is turning around. Others, however, suggest that the country still has a long way to go and it may be years yet before we truly reach financial recovery. Regardless of who is right though, one thing is clear: many people are facing significant financial hardships and need help now.
For many, the place they need the most help is keeping their homes out of foreclosure. The sub-prime mortgage disaster has left many people unable to make their monthly payments and facing the prospect of losing their homes.
In an effort to prevent the national economy from worsening and help alleviate some of the suffering felt by homeowners, the Obama Administration introduced the “Making Homes Affordable” plan last March. So far, however, the plan has failed to have the effect the Administration claimed it would, reaching far fewer homeowners than the millions promised.
Federal Programs to Refinance and Restructure Mortgages
Making Homes Affordable created two programs meant to help homeowners keep their homes out of foreclosure by either refinancing or restructuring their home loan debt.
The first program, the Home Affordable Refinance Program(HARP), is meant to help those homeowners who want to refinance their mortgages, but are unable to secure traditional refinancing because their home has lost value in the depressed market. HARP is only open to homeowners who have their loans owned or guaranteed by the government-run Fannie Mae or Freddie Mac. Additionally, refinancing through HARP will not lower or otherwise impact the principal owed on the loan.
Other eligibility requirements of the refinancing program include:
- Homeowners must be current on their mortgage payments
- Homeowners cannot have been more than 30 days late on a payment within the last 12 months
- The amount owed on the first mortgage cannot be more than 125% of the current market value of the home
- The homeowner must be able to demonstrate a reasonable ability to pay the refinanced amount
The second program, the Home Affordable Modification Program(HAMP), applies to homeowners who are delinquent in the mortgage payments and either in foreclosure or facing the immediate threat of foreclosure. Once a homeowner’s application is in review for the program, any foreclosure proceedings against him or her must be stayed until an eligibility decision is made.
To be eligible for HAMP, homeowners must demonstrate a financial hardship that makes it impossible for them to meet their mortgage obligations. This financial hardship may include things like unemployment and medical expenses. Some of the other qualifications homeowners must meet include:
- The unpaid principal balance on a single home cannot be more than $729,000
- The monthly mortgage payment must be more than 31% of the homeowner’s monthly pre-tax income
- The first mortgage on the home must have originated on or after January 1, 2009
- The home must be the primary residence
If the homeowner has more than one mortgage lien on the property, only the first mortgage is eligible for modification under the program.
Criticisms of the Federal Programs
Even as the federal government continues to laud the successes of its Making Homes Affordable programs, those who have sought acceptance into either program are telling a different story. Some of the chief criticisms of the federal mortgage programs include:
- The programs are not helping as many people as the Administration claimed they would. According to reports, only 6% of the 4 million eligible homeowners are participating in the refinancing or restructuring programs. As of September, 88% of the 1 million ARM mortgages had not been modified or refinanced. Only 575,000 homeowners have been offered a trial program and of those, only 360,000 currently are underway.
- The programs only are mandatory for federal lenders and not private ones. Right now, private lenders like Bank of America and Citigroup are not required to participate in either program. Given that private lenders hold 85% of the 14 million mortgages in the country, their participation is necessary to offer any real relief.
- Voluntary involvement by private lenders is limited. Even though the federal government is pushing private lenders to become more involved – and giving them bail-out money as an incentive – the participation rates by private banks and other lenders are still low. Recent reports put JP Morgan Chase at the top of the list, having enrolled 20% of its eligible customers in the federal program. Wells Fargo and Bank of America round-out the bottom of the list with 6% and 4% respective enrollment.
- The process itself is difficult for homeowners. When homeowners are deemed eligible to participate in the program, they are buried under paperwork and may be forced to wait months before they obtain final approval. Many private lenders do not have the resources or personnel to handle the onslaught of requests, leading to lost documents, duplicate requests and long waits. The process is confusing at best, making it not worth the hassle for some frustrated homeowners.
- The programs do not offer relief to those who need it most.Arguably the biggest problem with the program is that it fails to help those in the worst financial straits. Homeowners behind in their payments are not eligible for the refinancing option. Those who qualify for the restructuring option must be able to make three payments on-time during the trial period in order to secure final approval for the restructured mortgage. If they fail to do so, they are dropped from the trial program and their home is subject to foreclosure. It stands to reason that an option should be made available for those in the worst financial conditions who cannot meet the eligibility requirements for either program.
Conclusion
People who have found themselves behind on their mortgages and facing foreclosure have other options besides seeking participation in one of the federally-sponsored Making Homes Affordable programs. Lenders have created their own refinancing and restructuring programs for many homeowners. If a bank program is not an option, homeowners may be able to keep their home out of foreclosure by negotiating a private settlement with the lender or filing for Chapter 13 bankruptcy protection.
For more information contact the Grand Law Firm
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9/23/10
Grand Law Firm, thank you for publishing this honest report.
My son is in the Military, has served in Iraq and Germany and is our local Hometown Hero. He bought his home with all intent to raise his children in the same city he was raised. However, his wife walked out leaving him with the mortgage, community credit debt and now rightfully so, the payment of child support, day care and insurance for the children.
He tried to file for a loan modification with Bank of America due to the divorce and loss of income, was told he was qualified and sent a large packet of paperwork to fill out. It took days to fill out, acquire and copy the requested documents. Bank of America said they never received it. His wife refused to sign the paperwork again and Bank of America refused to accept the paperwork without her signature.
Bank of America then assigned IBM Lending to the account and IBM said to send all the paperwork in for a loan mod or short sale, according to the forms on their website and they would review it.
Meanwhile the house is set to sell at auction/Deed of Trustee Sale and he could not get a reply from IBM Lending. They have call centers in 3 states and no one was assigned to the loan. After being left on hold for 30 to 40 minutes at a time, calls transferred and then dropped, he recorded the names of twenty different people answering the phone, each with a different answer. Even though the call center operators ask for your name, loan number, social security number, address and PHONE NUMBER, no one ever returned messages, or calls lost during a conversation, you could never be put through to the person you were talking to. Suddenly, they were “out for the day”, “gone for the day” or “away from their desk.”
Finally, the day before the auction, they told him he could only speak to someone in Loss Mitigation and they could stop the auction, and they finally gave him a name of someone assigned to his file. The Auction was set for 10:30am and she said there was plenty of time to notify the Deed of Trustee to call off the sale. Then she called at 8:30am, the morning of the sale and said she needed another copy of his ex-wife’s latest paystub, so he faxed it to her “RUSH” fax number and acknowledged receiving it. Then once again he was put on hold for 30 minutes. He hung up and I called back and was told she was on another line but we were next in queue, but after holding for 40 minutes, she never picked up the line.
We were at the auction; the opening bid was $315,000. The house has been appraised at $50,000. Needless to say, no one bid on it and “it went back to the bank”
Who is the “bank”, Bank of America, IBM Lending, Green point Mortgage, Countrywide or Fannie Mae? It has been transferred so many times; they couldn’t even tell us who the bank or the lender was. Lastly, IBM Lending said an investor had the note on the house but couldn’t tell us who it was.
Today, Fannie Mae posted a note a “Notice to Occupants” that a property manager is now in charge of the property. Of course, there is no homeowner address listed nor is the “Notice” dated or signed. We do not know if it is legitimate or not but surely it is. That is the story of an American Hero losing his home due to the economy, the mortgage being upside down, the refusal of his banks and lenders to cooperate with the Making Home Affordable program designated by our President.
Even with so many plans for Department of Defense and active duty military, no such privileges were offered to him. As such, a man’s home is taken away, sold to an investor and then rented out. The only ones who are being afforded help are the banks and investors, and certainly not the homeowner’s.
The plan is a disgrace, and none of our neighbors who requested loan mods, got them either. They have all been foreclosed on, they have lost their homes, and many like us have nowhere to go. In eminent danger of being homeless.
Another friend got laid-off last month and is now in danger of losing her home. I pity what lies ahead for her and so many innocent families who through no fault of their own are losing everything.
We were once middle class working members of society, now we are months and hours away from being homeless in California. Is that what an American soldier and his children deserve?